Correlation Between Hawaiian Holdings and China Southern

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Can any of the company-specific risk be diversified away by investing in both Hawaiian Holdings and China Southern at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hawaiian Holdings and China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hawaiian Holdings and China Southern Airlines, you can compare the effects of market volatilities on Hawaiian Holdings and China Southern and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hawaiian Holdings with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawaiian Holdings and China Southern.

Diversification Opportunities for Hawaiian Holdings and China Southern

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between Hawaiian and China is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Holdings and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines and Hawaiian Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hawaiian Holdings are associated (or correlated) with China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of Hawaiian Holdings i.e., Hawaiian Holdings and China Southern go up and down completely randomly.

Pair Corralation between Hawaiian Holdings and China Southern

Allowing for the 90-day total investment horizon Hawaiian Holdings is expected to generate 3.93 times more return on investment than China Southern. However, Hawaiian Holdings is 3.93 times more volatile than China Southern Airlines. It trades about 0.02 of its potential returns per unit of risk. China Southern Airlines is currently generating about 0.07 per unit of risk. If you would invest  1,736  in Hawaiian Holdings on December 29, 2023 and sell it today you would lose (404.00) from holding Hawaiian Holdings or give up 23.27% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy41.41%
ValuesDaily Returns

Hawaiian Holdings  vs.  China Southern Airlines

 Performance 
       Timeline  
Hawaiian Holdings 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Hawaiian Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hawaiian Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
China Southern Airlines 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days China Southern Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, China Southern is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Hawaiian Holdings and China Southern Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hawaiian Holdings and China Southern

The main advantage of trading using opposite Hawaiian Holdings and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawaiian Holdings position performs unexpectedly, China Southern can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Southern will offset losses from the drop in China Southern's long position.
The idea behind Hawaiian Holdings and China Southern Airlines pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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